-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LWViklXN+Op+WbtuTjcq9NpH1cm912jFrcRLLRe2CMdd92MALBv+xMLN1rXLtzZj 7vKYk5cn9ymW5AUDdOpDsg== 0000899243-99-001092.txt : 19990518 0000899243-99-001092.hdr.sgml : 19990518 ACCESSION NUMBER: 0000899243-99-001092 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARKWEST HYDROCARBON INC CENTRAL INDEX KEY: 0001019756 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 841352233 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-14841 FILM NUMBER: 99624683 BUSINESS ADDRESS: STREET 1: 155 INVERNESS DRIVE WEST STREET 2: SUITE 200 CITY: ENGLEWOOD STATE: CO ZIP: 80112-5004 BUSINESS PHONE: 3032908700 MAIL ADDRESS: STREET 1: 155 INVERNESS DRIVE WEST STREET 2: SUITE 200 CITY: ENGLEWOOD STATE: CO ZIP: 80112-5004 10-Q/A 1 FORM 10-Q/A FOR MARCH 31, 1999 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 1-11566 MARKWEST HYDROCARBON, INC. (Exact name of registrant as specified in its charter) Delaware 84-1352233 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 155 Inverness Drive West, Suite 200, Englewood, CO 80112-5000 (Address of principal executive offices) Registrant's telephone number, including area code: 303-290-8700 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- The registrant had 8,491,156 shares of common stock, $.01 per share par value, outstanding as of May 4, 1999. PART I--FINANCIAL INFORMATION Item 1. Consolidated Financial Statements MARKWEST HYDROCARBON, INC. CONSOLIDATED BALANCE SHEET (000s, except share data)
March 31, 1999 December 31, ASSETS (Unaudited) 1998 -------------- ------------ Current assets: Cash and cash equivalents.......................................................... $ 512 $ 2,055 Receivables, net of allowance for doubtful accounts of $120 and $120, respectively.................................................................. 10,030 7,738 Inventories........................................................................ 1,591 4,583 Prepaid feedstock.................................................................. -- 1,957 Income taxes receivable............................................................ 2,233 2,763 Other assets....................................................................... 365 289 -------------- ------------ Total current assets........................................................... 14,731 19,385 Property and equipment: Gas processing, gathering, storage and marketing equipment......................... 77,397 78,018 Oil and gas properties and equipment............................................... 10,284 9,207 Land, buildings and other equipment................................................ 11,427 11,240 Construction in progress........................................................... 5,075 4,466 -------------- ------------ 104,183 102,931 Less: accumulated depreciation, depletion and amortization......................... (20,854) (19,609) -------------- ------------ Total property and equipment, net.............................................. 83,329 83,322 Intangible assets, net of accumulated amortization of $227 and $169, respectively...... 847 924 -------------- ------------ Total assets........................................................................... $ 98,907 $103,631 ============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable............................................................. $ 1,382 $ 2,765 Accrued liabilities................................................................ 6,530 5,094 Current portion of long-term debt.................................................. 64 63 -------------- ------------ Total current liabilities...................................................... 7,976 7,922 Deferred income taxes.................................................................. 7,077 7,077 Long-term debt......................................................................... 33,582 38,597 Stockholders' equity: Preferred stock, par value $0.01, 5,000,000 shares authorized, 0 shares outstanding -- -- Common stock, par value $0.01, 20,000,000 shares authorized, 8,531,206 and 8,531,206 shares issued, respectively............................................. 85 85 Additional paid-in capital......................................................... 42,580 42,693 Retained earnings.................................................................. 8,083 7,978 Treasury stock, 41,430 and 60,300 shares, respectively............................. (476) (721) -------------- ------------ Total stockholders' equity.............................................. 50,272 50,035 -------------- ------------ Total liabilities and stockholders' equity............................................. $ 98,907 $103,631 ============== ============
The accompanying notes are an integral part of these financial statements. 1 MARKWEST HYDROCARBON, INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) (000s, except per share data)
For the three months ended March 31, 1999 1998 ------------------------ ------------------------ Revenues: Gathering, processing and marketing revenue.............. $21,828 $19,854 Oil and gas revenue, net of transportation and taxes..... 265 357 Interest income.......................................... 14 71 Other income (expense)................................... (16) 20 ------------------------ ------------------------ Total revenue.................................... 22,091 20,302 ------------------------ ------------------------ Costs and expenses: Cost of sales............................................ 15,265 13,284 Operating expenses....................................... 2,985 2,669 General and administrative expenses...................... 1,580 1,522 Depreciation, depletion and amortization................. 1,303 970 Interest expense......................................... 800 447 ------------------------ ------------------------ Total costs and expenses......................... 21,933 18,892 ------------------------ ------------------------ Income before income taxes................................... 158 1,410 Provision for income taxes: Current.................................................. 51 34 Deferred................................................. (4) 459 ------------------------ ------------------------ 47 493 ------------------------ ------------------------ Net income................................................... $ 111 $ 917 ======================== ======================== Basic earnings per share..................................... $ 0.01 $ 0.11 ======================== ======================== Earnings per share assuming dilution......................... $ 0.01 $ 0.11 ======================== ======================== Weighted average number of outstanding shares of common stock 8,478 8,496 ======================== ========================
The accompanying notes are an integral part of these financial statements. 2 MARKWEST HYDROCARBON, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (000s)
For the three months ended March 31, 1999 1998 -------------------- ------------------- Cash flows from operating activities: Net income...................................................................... $ 111 $ 917 Add income items that do not affect working capital: Depreciation, depletion and amortization..................................... 1,303 970 Deferred income taxes........................................................ (4) 459 Gain on sale of assets....................................................... (12) -- -------------------- ------------------- 1,398 2,346 Adjustments to working capital: (Increase) decrease in receivables.......................................... (2,292) 4,331 Decrease in inventories..................................................... 2,992 2,575 Decrease in prepaid expenses and other assets............................... 2,411 2,403 Increase (decrease) in accounts payable and accrued liabilities............. 545 (285) -------------------- ------------------- 3,656 9,024 Net cash provided by operating activities....................................... 5,054 11,370 Cash flows from investing activities: Capital expenditures........................................................ (2,153) (3,880) Proceeds from sale of assets.................................................. 420 -- Change in intangible assets................................................. 18 (30) -------------------- ------------------- Net cash used in investing activities...................................... (1,715) (3,910) Cash flows from financing activities: Proceeds from long-term debt................................................ 4,798 8,700 Repayment of long-term debt................................................. (9,812) (15,455) Net reissuance of treasury stock............................................ 132 -- Other....................................................................... -- 51 -------------------- ------------------- Net cash used in financing activities........................................... (4,882) (6,704) -------------------- ------------------- Net (decrease) increase in cash and cash equivalents............................ (1,543) 756 Cash and cash equivalents at beginning of period................................ 2,055 1,493 -------------------- ------------------- Cash and cash equivalents at end of period...................................... $ 512 $ 2,249 ==================== ===================
The accompanying notes are an integral part of these financial statements. 3 NOTE 1. GENERAL The consolidated financial statements include the accounts of MarkWest Hydrocarbon, Inc. ("MarkWest" or the "Company"), and its wholly owned subsidiaries, MarkWest Resources, Inc.; MarkWest Michigan, Inc.; and 155 Inverness, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and note disclosures required by generally accepted accounting principles for complete financial statements. The interim consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended December 31, 1998, included in the Company's Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. In the opinion of management, all adjustments necessary for a fair statement of the results for the unaudited interim periods have been made. These adjustments consist only of normal recurring adjustments. The effective corporate tax rate for interim periods is based on the estimated annual effective corporate tax rate, excluding certain nonrecurring or unusual events. The effective tax rate varies from statutory rates due primarily to tax credits and intangible development costs. Certain prior year amounts have been reclassified to conform to the 1999 presentation. NOTE 2. LONG-TERM DEBT Effective May 3, 1999, the Company amended its existing credit agreement. The amended credit agreement provides for a maximum borrowing amount of $50 million, $5 million of which is available pursuant to a term loan commitment and the remaining $45 million pursuant to a revolving loan commitment. Actual borrowing limits may be a lesser amount, depending on trailing cash flow, as defined in the agreement. The credit facility permits the Company to borrow money using either a base rate loan or a London Interbank Offered Rate ("Libor") loan option, plus an applicable margin of between 0% and 3%, based on a certain Company debt to earnings ratio. NOTE 3. COMMITMENTS AND CONTINGENCIES MarkWest filed arbitration proceedings in February 1998 to resolve issues with Columbia Gas Transmission Corporation ("Columbia") regarding three Appalachia natural gas plants. These plants are governed by several contracts, the most important of which extends through the year 2010. In this arbitration, MarkWest requests a declaration of rights and status to clarify agreements between the companies and certain monetary relief. Issues arose during ongoing negotiations between MarkWest and Columbia to finalize terms of a 1997 preliminary agreement in which, among other things, Columbia agreed to sell its Cobb plant to MarkWest and to transfer from Columbia to MarkWest the operation of the Boldman plant. These issues also include matters regarding operations at the Kenova plant. MarkWest owns the Boldman and Kenova plants. In April 1998, Columbia filed a Complaint against MarkWest in the United States District Court for the Southern District of West Virginia. The Complaint seeks declaratory relief that certain agreements, or certain specified provisions thereof, are void and that MarkWest is in breach of the Federal Energy Regulatory Commission-approved settlement agreement under which MarkWest was to acquire the Cobb plant and operate the Boldman plant. The certain agreements concern, among other matters, Columbia's obligation to guarantee the delivery of natural gas or NGLs to MarkWest. In the Complaint, Columbia also seeks injunctive relief to enjoin MarkWest from interfering with arrangements Columbia may seek to undertake with natural gas producers and suppliers and with negotiations Columbia may pursue with third parties to terminate its interests in the products extraction business. In the third quarter of 1998, the District Court judge stayed proceedings pending the binding arbitration noted above. Arbitration hearings initially scheduled to commence in March 1999 were vacated because of the need to replace a member of the arbitration panel. The new arbitrator has been named, and MarkWest anticipates that new hearing dates will be promptly established. Management believes it will prevail in its position and, accordingly, the outcome of this dispute is not likely to have a material effect on the financial condition, results of operations or prospects of MarkWest. 4 NOTE 4. SEGMENT REPORTING In 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. The Company's operations are classified into two reportable segments, as follows: (1) Processing and Related Services--provides compression, gathering, treatment and NGL extraction, and fractionation services; also purchases and markets natural gas and NGLs; and (2) Exploration and Production--explores for and produces natural gas. MarkWest evaluates the performance of its segments and allocates resources to them based on gross operating income. There are no intersegment revenues. MarkWest's business is conducted solely in the United States. The table below presents information about gross operating income for the reported segments for the quarters ended March 31, 1999 and 1998. Asset information by reportable segment is not reported, since MarkWest does not produce such information internally.
Processing and Related Services Exploration and Production Total ----------------------------- ---------------------------- --------------------- For the Quarter ended March 31, 1999 (in 000s): Revenues.................................. $21,828 $265 $22,093 Gross operating income.................... $ 3,700 $143 $ 3,843 For the Quarter ended March 31, 1998 (in 000s): Revenues.................................. $19,854 $357 $20,211 Gross operating income.................... $ 3,978 $280 $ 4,258
A reconciliation of total segment revenues to total consolidated revenues and of total segment gross operating income to total consolidated income, for the quarters ended March 31, 1999 and 1998, is as follows:
1999 1998 --------------------- --------------------- Revenues: Total segment revenues..................................... $22,093 $20,211 Interest income............................................ 14 71 Other income (expense)..................................... (16) 20 Total consolidated revenues.......................... $22,091 $20,302 ===================== ===================== Gross operating income: Total segment gross operating income....................... $ 3,843 $ 4,258 General and administrative expenses........................ (1,580) (1,522) Depreciation and amortization.............................. (1,303) (970) Interest expense........................................... (800) (447) Interest income............................................ 14 71 Other income (expense)..................................... (16) 20 --------------------- --------------------- Consolidated income before taxes..................... $ 158 $ 1,410 ===================== =====================
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